Seeing it on paper sure feels like a "hair on fire" emergency!
The mortgages are both banks, all roads to refi have been denied. OTOH (and to Another Reader's point), property in this particular (desirable) town is always the first to come back, and is starting to. My agent friend told me it will almost certainly go up from here, possibly a good deal, given time.
Given our new circumstances, in just over a year, it looks like I can pay off the 2nd mtg, and perhaps sell or refi at that time (though rates will be higher than now, maybe they'll be lower than 6.875%.
From feedback I'm getting, it's better to take the $300-400/mo hit renting, rather than the $20k+ hit on selling now, yes? It could even become a small income stream one day, with reorganized financing.